Thursday, November 08, 2012

For some reason neuromarketing seems to be flavor du jour in some quarters at the moment, I appear to be hearing about it all the time.Or perhaps it’s another example of the ‘frequency illusion’, or 'the Baader-Meinhof phenomenon' that we've mentioned here before.

I was asked to describe our point of view and approach to this subject via one of our clients and responded that, yes, this one element of how we look at describing buyer behavior but not any one-philosophy-fits-all.

In truth, our process means we probably ‘magpie’ some parts of neuroscience, mix with other bits of behavioural economics and some smatterings of psychology.

It’s not important or even necessary to have a complete understanding of the above sciences however it’s important have a broad understanding to pick out the pieces that are most useful.

In fact one of the most important parts to address before developing strategies is knowing 'how' a product or service is bought and what the influences are.

We often hear about communications that affect a behavior change, or otherwise.

But what is often not properly explained is what-the-existing-behavior-is-that requires-changing.

Selecting product X versus product Y is not a behavior change it’s just an instance or two of substitution of product.

1. Guesswork – where the choice is mostly independent, in categories with with low differentiation and a high number of choices - then things like sales promotions, 'twofers', and suchlike are key . Things like insurance often purchased in this manner.

2. Considered choice – again the choice is broadly independent, but there are fewer choices – in the book Mark cites things like deodorant falling into this bucket.

Social choices

1. Copying experts – where there are fewer number of choices but a higher price point then expert opinions matter – high end tech products are one example, some automotive is probably another.

2. Copying peers –where there are a high number of choices then social influence is a major factor. Fashion, music, movies etc. This is a pretty large quadrant and in fact most buying behaviour is influenced by peer copying.

Once this is established then the fun starts...

The key thing is to understand that the combination of social influence and then a layer of human biases is a heady mixture and testament to the idea that we really don't act in the rational cost-benefit-analysis way that economists and marketers imagine we do. In fact we are manipulated by our own biases all the time.

Here's my top five favourite biases.

ANCHORING BIAS
A common human trait to rely too heavily, or ‘anchor’ on one trait or piece of information when making decisions.
Here’s a real cancelled flights example that I fell for recently.

Airline: 'Sorry Mr Pritchard the 5.45 has been cancelled, but I can put you on the 9.45'
Me: 'WTF!'
Airline: 'Hang on, there's one seat on the 7.45 I can get you'
Me: 'cool!'

FRAMING EFFECT
The restaurant wine list – we instinctively go towards the mid price wines because the restaurant are craftily framing them with super-expensive and cheapskate options.
Or buying a car – 'do I get the basic no frills model or the high end super deluxe souped-up version? Actually let’s go for the one in the middle that looks like better value'

We've recently applied this to how we frame donation levels for a charity's online campaign. I expect to see an uplift in overall donations vs where they have been.

AVAILABILITY HEURISTIC
A mental rule of thumb in which we use the ease which similar examples come to mind to form an idea about the probability of certain events.
For example, more people are killed every year by refrigerators falling on top of them than by terrorists, but because of the 'availability' of information about terrorism we see that as more of a threat.

CONFIRMATION BIAS
Someone who has to write a blog post about neuromarketing, for example, will primarily search for information that would confirm his or her pre-existing beliefs ;)

COMMITMENT BIAS
The situation where people justify increased investment in a process, based on the cumulative prior investment, despite new evidence suggesting that
the cost, starting today, of continuing the decision now outweighs any expected benefit.
See also 'sunk cost fallacy'. Think about CommBank who continued to pump money into the 'CAN' campaign despite early evidence that it was sure to flop. heh.

And the best of all…

HINDSIGHT BIAS
Also known as the 'knew-it-all-along effect' is the inclination to see events that have already occurred as being more predictable than they were before they took place.

'I wish I'd put that $100 on Green Moon, I knew it was going to win…'

That’s not an exhaustive list by any stretch. There’s literally hundreds of foibles we all succumb to on a moment by moment basis.
I’m working up a post on the Texas Sharpshooter Bias as we speak, so stand by for that…

Also the other fundamental to remember is that behaviour shapes attitudes not the other way round. We will almost always modify our attitudes to be consistent with our behaviours.

We post-rationalise our decisions afterwards.

Any given product does not have to be clearly better in terms of rational features or benefits. Its social value, for instance may be more useful.

After all, there’s plenty of 'better' phones out there other than Apple’s but, for now, it's arguably still the popular choice because it says something about the taste of it's owner.

So the if objective is to change the buyer behaviour first, this may involve moving the behaviour around a product or service from one ‘type’ of behaviour to another.

For instance, outside of two or three big ones, the majority of breakfast serial purchase behaviour could be lumped into in the guesswork category. Driven by promotions and such-like, so any behavior change strategy would first involve moving buyer behaviour from a guesswork, commodity, space into a peer-copying space .

There is a precedent, I've seen some research to suggest that around 60-70% of groceries are bought because they are the brands that 'mum' bought, so there’s a territory to start with.

Unfortunately there is no 'buy-button' in the brain despite what some neuromarketers say. If only it were as straightforward.

There’s a great TED talk I saw recently, and I forgot to bookmark it so if any readers recognize this bit then please point me to the talk.

The speaker recounts the ways in which through his research he identified the ways in which people describe the 'story' of their lives.

A Journey?
A Film?
A Novel?
A Battle?

These were all popular descriptions.

No-one described their life story as a mess.

But, for most of us that’s what it is.

For those looking for a silver bullet in marketing then the bad news is that there isn't one.

Human behavior is a big wonderful a mess that you just have to pick through and try and find the bits that are going to work for you.

For some reason neuromarketing seems to be flavor du jour in some quarters at the moment, I appear to be hearing about it all the time.Or perhaps it’s another example of the ‘frequency illusion’, or 'the Baader-Meinhof phenomenon' that we've mentioned here before.

I was asked to describe our point of view and approach to this subject via one of our clients and responded that, yes, this one element of how we look at describing buyer behavior but not any one-philosophy-fits-all.

In truth, our process means we probably ‘magpie’ some parts of neuroscience, mix with other bits of behavioural economics and some smatterings of psychology.

It’s not important or even necessary to have a complete understanding of the above sciences however it’s important have a broad understanding to pick out the pieces that are most useful.

In fact one of the most important parts to address before developing strategies is knowing 'how' a product or service is bought and what the influences are.

We often hear about communications that affect a behavior change, or otherwise.

But what is often not properly explained is what-the-existing-behavior-is-that requires-changing.

Selecting product X versus product Y is not a behavior change it’s just an instance or two of substitution of product.

1. Guesswork – where the choice is mostly independent, in categories with with low differentiation and a high number of choices - then things like sales promotions, 'twofers', and suchlike are key . Things like insurance often purchased in this manner.

2. Considered choice – again the choice is broadly independent, but there are fewer choices – in the book Mark cites things like deodorant falling into this bucket.

Social choices

1. Copying experts – where there are fewer number of choices but a higher price point then expert opinions matter – high end tech products are one example, some automotive is probably another.

2. Copying peers –where there are a high number of choices then social influence is a major factor. Fashion, music, movies etc. This is a pretty large quadrant and in fact most buying behaviour is influenced by peer copying.

Once this is established then the fun starts...

The key thing is to understand that the combination of social influence and then a layer of human biases is a heady mixture and testament to the idea that we really don't act in the rational cost-benefit-analysis way that economists and marketers imagine we do. In fact we are manipulated by our own biases all the time.

Here's my top five favourite biases.

ANCHORING BIAS
A common human trait to rely too heavily, or ‘anchor’ on one trait or piece of information when making decisions.
Here’s a real cancelled flights example that I fell for recently.

Airline: 'Sorry Mr Pritchard the 5.45 has been cancelled, but I can put you on the 9.45'
Me: 'WTF!'
Airline: 'Hang on, there's one seat on the 7.45 I can get you'
Me: 'cool!'

FRAMING EFFECT
The restaurant wine list – we instinctively go towards the mid price wines because the restaurant are craftily framing them with super-expensive and cheapskate options.
Or buying a car – 'do I get the basic no frills model or the high end super deluxe souped-up version? Actually let’s go for the one in the middle that looks like better value'

We've recently applied this to how we frame donation levels for a charity's online campaign. I expect to see an uplift in overall donations vs where they have been.

AVAILABILITY HEURISTIC
A mental rule of thumb in which we use the ease which similar examples come to mind to form an idea about the probability of certain events.
For example, more people are killed every year by refrigerators falling on top of them than by terrorists, but because of the 'availability' of information about terrorism we see that as more of a threat.

CONFIRMATION BIAS
Someone who has to write a blog post about neuromarketing, for example, will primarily search for information that would confirm his or her pre-existing beliefs ;)

COMMITMENT BIAS
The situation where people justify increased investment in a process, based on the cumulative prior investment, despite new evidence suggesting that
the cost, starting today, of continuing the decision now outweighs any expected benefit.
See also 'sunk cost fallacy'. Think about CommBank who continued to pump money into the 'CAN' campaign despite early evidence that it was sure to flop. heh.

And the best of all…

HINDSIGHT BIAS
Also known as the 'knew-it-all-along effect' is the inclination to see events that have already occurred as being more predictable than they were before they took place.

'I wish I'd put that $100 on Green Moon, I knew it was going to win…'

That’s not an exhaustive list by any stretch. There’s literally hundreds of foibles we all succumb to on a moment by moment basis.
I’m working up a post on the Texas Sharpshooter Bias as we speak, so stand by for that…

Also the other fundamental to remember is that behaviour shapes attitudes not the other way round. We will almost always modify our attitudes to be consistent with our behaviours.

We post-rationalise our decisions afterwards.

Any given product does not have to be clearly better in terms of rational features or benefits. Its social value, for instance may be more useful.

After all, there’s plenty of 'better' phones out there other than Apple’s but, for now, it's arguably still the popular choice because it says something about the taste of it's owner.

So the if objective is to change the buyer behaviour first, this may involve moving the behaviour around a product or service from one ‘type’ of behaviour to another.

For instance, outside of two or three big ones, the majority of breakfast serial purchase behaviour could be lumped into in the guesswork category. Driven by promotions and such-like, so any behavior change strategy would first involve moving buyer behaviour from a guesswork, commodity, space into a peer-copying space .

There is a precedent, I've seen some research to suggest that around 60-70% of groceries are bought because they are the brands that 'mum' bought, so there’s a territory to start with.

Unfortunately there is no 'buy-button' in the brain despite what some neuromarketers say. If only it were as straightforward.

There’s a great TED talk I saw recently, and I forgot to bookmark it so if any readers recognize this bit then please point me to the talk.

The speaker recounts the ways in which through his research he identified the ways in which people describe the 'story' of their lives.

A Journey?
A Film?
A Novel?
A Battle?

These were all popular descriptions.

No-one described their life story as a mess.

But, for most of us that’s what it is.

For those looking for a silver bullet in marketing then the bad news is that there isn't one.

Human behavior is a big wonderful a mess that you just have to pick through and try and find the bits that are going to work for you.